The Hindu Vocabulary 06th Feb 2018

For more equity: on long-term capital gains tax

The Centre’s decision to bring back the long-term capital gains tax (LTCG) on equities, which was scrapped in 2004-05, seems to be a hasty move to plug the widening fiscal deficit ahead of an election year. With investors in equities enjoying terrific returns over the last few years, it is not a surprise that they have become targets for the government to secure additional revenue. The decision to announce the imposition (लगाना) of 10% tax on gains of over ₹1 lakh made on any form of investment in listed equities and mutual funds with a holding period of over one year will hit the average middle class investor. Not surprisingly, the sharp fall in both the Nifty and the Sensex after Budget day has been linked to the new tax, along with the government’s abandonment of fiscal goals. But given that the sell-off was part of a wider correction in global stock indices, it may be hard to draw a definite conclusion on the exact impact of the LTCG. The Centre has justified the new tax arguing that it helps avoid the erosion of its tax base and levels the playing field between financial assets and investment in manufacturing.

One legitimate (जायज) concern is whether raising the tax burden on equities, rather than lowering the tax and other barriers to investing in alternative assets, is the right way to address the distortionary (विरूपणयोग्य) effect of taxes. Further, the smaller differential between short and long-term capital gains tax itself will discourage the long-term holding of stocks in favour of short-term trading activity. While this might serve to improve liquidity in Indian markets and add to the government’s revenue, it is also likely to discourage to some extent the growing culture of investing in equities for the long run. Besides, the securities transaction tax (STT), which was introduced in lieu of the LTCG in 2004 and penalises the buying of stocks for purposes other than just intra-day trading, has been left untouched by the government. The double whammy (जादू-टोना) of the STT and LTCG will further privilege (विशेषाधिकार) short-term trading in stocks over long-term investment. Being the only country in the world to impose both the STT and LTCG, India is also likely to become a little less attractive to foreign investors when compared to its peers (सामंत). A complete rollback of the new tax is too much to expect — Finance Secretary Hasmukh Adhia has justified the higher tax levy saying that the capital gains accrue (को प्राप्त होना) from zero effort. Despite the constraints (मजबूरी), the government would do well to at least soften the negative impact of the new tax by allowing indexation (allowing a set-off based on inflation rate) of capital gains and removing the STT on equity investments. Tough love for the well-off is not a bad strategy for a pre-election Budget, but it is important to be careful about maintaining India’s credibility in the global money markets in the process.

Imposition: a charge usually of money collected by the government from people or businesses for public useSynonyms: assessment, duty, tax, impost, levy

Distortionary: the state of being distorted or the relative degree or amount by which something is distorted or distorts.Synonyms: warp, twist, contortion, bend, buckle, deformation, deformity, curve, curvature, malformation, disfigurement, crookedness

Whammy:An event with a powerful and unpleasant effect; a blow.Synonyms: shock, surprise, bombshell, bolt from the blue, bolt out of the blue, thunderbolt, jolt, rude awakening

Youth power: on India’s U-19 World Cup win

Indian cricket has its work cut out to mentor the Under-19 team for the bigger stage

India’s title triumph in the Under-19 cricket World Cup at the Bay Oval in New Zealand seemed inevitable (अवश्यंभावी). Prithvi Shaw’s boys, astutely (समझदारी से) coached by Rahul Dravid, maintained an unbeaten record through their three-week sojourn (टिकना). The rousing (उत्साहपूर्ण) campaign commenced with a 100-run win against Australia on January 14; in subsequent games, Papua New Guinea, Zimbabwe, Bangladesh and Pakistan were all emphatically (सुस्पष्ट रूप से) defeated. There were no big-game nerves and even in the much-hyped semifinal against Pakistan, India pocketed a facile (अनुकूल) 203-run victory. In the summit clash against Australia, Shaw’s boys followed their template of dominance. Australia was bowled out for 216 and India cruised (लक्ष्य प्राप्त करना) home in 38.5 overs with eight wickets to spare, and enjoyed the added lustre (प्रकाश) of opener Manjot Kalra’s unbeaten 101. Through the tournament India found diverse heroes. Fittingly, its batting troika (नेता के रूप में काम करने वाले तीन जन) of Shaw, Kalra and Shubman Gill, along with seamer Kamlesh Nagarkoti and spinner Anukul Roy, found a berth in the International Cricket Council’s Under-19 World Cup team, essentially a tribute to the best players on view in the championship. Cricketing excellence allied with the resultant celebrity status, especially during the teenage years, can be a double-edged sword and it helped that in the dressing room there was the calming presence of Dravid. As the ecstatic players leapt and photo-bombed after clinching the trophy, Dravid cut through the hype and said that this win should not be the team’s defining memory as each individual cricketer has much more to achieve in his career.

Dravid has a point. India has won the Under-19 World Cup on four occasions, including the previous golden runs in 2000, 2008 and 2012. From among these champion sides, only a few graduated to the big stage. Yuvraj Singh and Virat Kohli came through the under-19 ranks and managed to carve a niche (मौका) for themselves, but Unmukt Chand, who led the team to the Cup in 2012, and then featured in a soft drink advertisement besides writing a book, has been unable to make it to the Indian senior team. He is still finding his feet with the Delhi squad in domestic cricket. Shaw and his mates will be aware that after the spectacular rise under the New Zealand skies, they still have to earn and preserve their respective spots in the State outfits before earning the right to rub shoulders with Kohli and his men. The road towards the high-stakes game of international cricket is long and arduous and history has taught us that not all teenage prodigies (पूर्वलक्षण) can be a Sachin Tendulkar or a Kohli. For Shaw and company, the journey has only begun but their moment in the sun does suggest that Indian cricket’s conveyor belt is moving smoothly along.